Europe PP prices rise by almost 10% in April

07 April 2010 16:30  [Source: ICIS news]

Total Petrochemical PP plantLONDON (ICIS news)--European polypropylene (PP) buyers are confirming increases of €100/tonne ($133/tonne) for April sales on restricted availability, after already paying 20% more for their product in 2010, several said on Wednesday.

“I’ve never seen anything like this in my 15 years in the business,” said one buyer.

PP prices had already risen by €200/tonne in 2010, and now a third hike, which some producers reported to be as high as €130/tonne, was being foisted onto the market, buyers said.

“Our net homopolymer injection prices are around €1,200/tonne [FD (free delivered) NWE (northwest Europe)] for April,” said a producer.

“Product is very, very tight. We can ask almost what we want,” said another.

“It is very difficult to survive,” said the buyer. “Last week I thought I was going to have to close a line because I didn’t have the product. And there is no way we can get these increases back.”

Another large buyer confirmed paying an increase for April, of €100-110/tonne, depending on supplier.

Other buyers were trying to hold the increase at €70/tonne, but as the month progressed, freely negotiated sales were looking less likely to be done at such an increase. Propylene-based contracts would automatically be settled at plus €70/tonne, the increase seen in the April monthly propylene contract, agreed sources.

PP inventories had been low for many months. Buyers expected to be offered material from new capacities in the Middle East, and kept stocks low, buying on a hand-to-mouth basis.

Producers’ inventories were also low, mainly due to restraints upstream, as low refinery runs and cuts at crackers, introduced initially to keep ethylene from being oversupplied, also affected propylene output.

One major PP producer acknowledged that the situation was difficult for converters, but said that margins were unworkably low: “Pricing is not the issue at the moment. We need margin on top of propylene. €30/tonne [increase above propylene costs] is realistic and defendable. Internally we have endless discussion over allocation.”

Another producer said: “I’ve been accused of exploiting the situation and profiteering, among other things.”

Market sources began to ponder on when the current tight situation would ease. Several producers hinted at yet more increases in May, when they expected the tight situation to continue.

Others kept an eye on Asia, looking for opportunities to import product into Europe as prices climbed higher.

“One thing is sure,” said a trader. “When prices start coming down, the buyers will be looking for blood.”

PP producers in Europe include LyondellBasell, Borealis, SABIC, Total Petrochemicals, Dow Chemical, Repsol, INEOS Olefins and Polymers, Polychim and Domo.

($1 = €0.75)

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By: Linda Naylor
+44 20 8652 3214

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